Many states have no-fault laws in place, which prevent drivers from suing each other if the damage caused by their accident is below a certain threshold. Instead, those drivers recover the cost of their accident damages directly from their insurance company. However, in cases where the parties are able to sue each other, their attorneys often have to deal with a complex element of the lawsuit known as subrogation.
How no-fault laws work
To illustrate what no-fault laws do, we can look at Kentucky. Kentucky’s no-fault law is called the Motor Vehicle Reparations Act of 1975. Under the Act, the driver of a motor vehicle automatically accepts certain limitations on their right to sue – as well as certain protections against being sued – in case of a car crash.
In most states, residents can choose to opt out of this limitation and protection by filing specific forms. By removing their limitation on being able to sue, they also open themselves up to suit.
Kentucky’s (and most states’) acts’ limitations prevent injured people from recovering any medical expenses – or any other expenses resulting from the crash – unless the damages from the accident reach a certain threshold dollar amount, or unless the accident results in a broken bone, permanent injury or death.
They also usually require drivers to maintain personal injury protection (PIP) coverage. This means that when someone gets into an accident, unless they purchased higher benefits and deductibles, their insurance company is only obligated to provide them with up to a certain amount, such as $10,000 per person, for costs related to their injury.
It is worth noting that the PIP coverage, which is usually mandatory for cars, is often optional for motorcycles. If your client is involved in a motorcycle accident, you should verify whether they purchased PIP coverage or not, to determine whether or not they are open to a lawsuit.
How no-fault laws affect subrogation
Subrogation is when an insurance company steps into the shoes of the policyholder and brings a lawsuit against the liable party to recover the amount it had to pay to the policyholder.
If a negligent driver hits your client, your client will be compensated by their insurance company, and then that company can use subrogation to bring a suit against the negligent driver to recover that amount.
The insurance company can only sue the responsible party to the extent that the policy holder could have sued them. If a no-fault law protects the party that hit your client from suit, then your client’s insurance company won’t be able to use subrogation. Likewise, if the no-fault law protects your client from suit, then the opposing party’s insurance company won’t be able to come after your client for subrogation either.
This is why it is essential to understand whether the no-fault law in your client’s state applies or not. If the damages that your client is responsible for are above the statutory limit for that state’s no-fault law, and recovery from them is an option that the opposing party is likely to pursue, then subrogation might be an important aspect of the lawsuit that you need to prepare for.
Consulting with an experienced subrogation attorney is a good idea, as they will be able to tell you whether subrogation is on the table for your client’s specific case.